# Complete the following table and answer the short discussion question.Average Cost(AC)AverageFixed CostTotal CostAverageVariable CostOutput (Q)Total FixedTotal VariableMarginalCost (MC)Cost (TVC)Cost (TFC)(TC)(AFC)(AVC)\$50\$751\$1002\$1203\$1354\$1505\$1906\$260Given the results from your table, what level of output would you produce to minimize cost per unit? If the price of the product is \$20 per unit, how many units of output would youproduce? What is your decision rule?

Question
Step 1

In economics, TFC is the cost incurred when the output production is zero; therefore, here, TFC is \$50. However, TC is the sum of both TFC and TVC; therefore, here, TVC = TC – TFC. Also, AFC and AVC are determined by taking the ratio of TVC and TFC with the total output produced respectively, that is, AVC = TVC/Q and AFC = TFC/Q. Furthermore, MC measures the change in the TC when an additional unit of output is produced, i.e., MC = TCn – TCn-1.

Step 2

Consider the above formulas to complete the following table:

Step 3

Production cost is minimum when MC = Minimum of AC. Here, in the above case, the gap between AC and MC is minimum at 5...

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